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Federal Register / Vol. 76, No. 62 / Thursday, March 31, 2011 / Notices
Dated: March 22, 2011.
David Epperson,
Chief Information Officer, National Protection
and Programs Directorate, Department of
Homeland Security.
[FR Doc. 2011–7595 Filed 3–30–11; 8:45 am]
BILLING CODE P
DEPARTMENT OF HOMELAND
SECURITY
United States Immigration and
Customs Enforcement
Agency Information Collection
Activities: Revision of an Existing
Information Collection; Comment
Request
60-Day Notice of Information
Collection for Review; Secure
Communities IDENT/IAFIS
Interoperability State and Local Agency
Assessment; OMB Control No. 1653–
0040.
ACTION:
The Department of Homeland
Security, U.S. Immigration and Customs
Enforcement (ICE), will be submitting
the following information collection
request for review and clearance in
accordance with the Paperwork
Reduction Act of 1995. The information
collection is published to obtain
comments from the public and affected
agencies. Comments are encouraged and
will be accepted for sixty days until
May 31, 2011.
Written comments and suggestions
regarding items contained in this notice,
and especially with regard to the
estimated public burden and associated
response time should be directed to the
Office of the Chief Financial Officer/
OAA/Records Branch, U.S. Immigration
and Customs Enforcement, 500 12th
Street, SW., STOP 5705 Washington, DC
20536–5705.
Comments are encouraged and will be
accepted for sixty days until May 31,
2011. Written comments and
suggestions from the public and affected
agencies concerning the proposed
collection of information should address
one or more of the following four points:
(1) Evaluate whether the proposed
collection of information is necessary
for the proper performance of the
functions of the agency, including
whether the information will have
practical utility;
(2) Evaluate the accuracy of the
agencies estimate of the burden of the
proposed collection of information,
including the validity of the
methodology and assumptions used;
(3) Enhance the quality, utility, and
clarity of the information to be
collected; and
(4) Minimize the burden of the
collection of information on those who
are to respond, including through the
use of appropriate automated,
electronic, mechanical, or other
technological collection techniques or
other forms of information technology,
e.g., permitting electronic submission of
responses.
Overview of this information
collection:
(1) Type of Information Collection:
Revision of a currently approved
information collection.
(2) Title of the Form/Collection:
Secure Communities IDENT/IAFIS
Interoperability State and Local Agency
Assessment.
(3) Agency form number, if any, and
the applicable component of the
No. of respondents
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3,500 ...........
3,500 ...........
300 ..............
56 ................
Average burden per response (in
hours)
Form name/Form No.
Secure
Secure
Secure
Secure
Communities
Communities
Communities
Communities
Initiative
Initiative
Initiative
Initiative
Survey—State/Form 70–003 ....................................................................................
Survey—Local/Form 70–004 ....................................................................................
Survey—DOC Facilities 75–001 ...............................................................................
Survey—DOC Officials/Form 75–002 .......................................................................
(6) An estimate of the total public
burden (in hours) associated with the
collection: 2,453 annual burden hours.
Comments and/or questions; requests
for a copy of the proposed information
collection instrument, with instructions;
or inquiries for additional information
should be directed to: Office of the Chief
Financial Officer/OAA/Records Branch,
U.S. Immigration and Customs
Enforcement, 500 12th Street, SW.,
VerDate Mar<15>2010
Department of Homeland Security
sponsoring the collection: Form 70–003,
Form 70–004, Form 75–001 and Form
75–002; U.S. Immigration and Customs
Enforcement.
(4) Affected public who will be asked
or required to respond, as well as a brief
abstract: Primary: State and Local
Correctional Facilities and Officials. 8
U.S.C. 1231(a) gives the Department of
Homeland Security (DHS), U.S.
Immigration and Customs Enforcement
(ICE) authority to remove criminal
aliens who have been ordered as such.
DHS/ICE is improving community
safety by transforming the way the
Federal government cooperates with
state and local law enforcement
agencies to identify, detain, and remove
all criminal aliens held in custody.
Secure Communities revolutionizes
immigration enforcement by using
technology to share information
between law enforcement agencies and
applying risk-based methodologies to
focus resources on assisting all local
communities remove high-risk criminal
aliens. In order for the Secure
Communities Initiatives to meet its
goals, ICE must collect detailed business
requirements and input from its state
and local law enforcement partners.
This assessment determines the
fingerprint procedures and
technological capabilities of state and
local jails governance, as well as basic
jail booking statistics. This information
is used in order to prioritize local sites
and deliver the implementation strategy
of the Secure Communities Initiative.
(5) An estimate of the total number of
respondents and the amount of time
estimated for an average respondent to
respond:
11:23 Mar 31, 2011
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0.3333
0.3333
0.3333
0.3333
STOP 5705 Washington, DC 20536–
5705.
DEPARTMENT OF HOUSING AND
URBAN DEVELOPMENT
Dated: March 25, 2011.
John Ramsay,
Forms Program Manager, Office of Asset
Administration, U.S. Immigration and
Customs Enforcement, Department of
Homeland Security.
[Docket No. FR–5450–N–03]
[FR Doc. 2011–7550 Filed 3–30–11; 8:45 am]
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Federal Housing Administration (FHA):
Notice of FHA PowerSaver Home
Energy Retrofit Loan Pilot Program
Office of the Assistant
Secretary for Housing-Federal Housing
Commissioner, HUD.
AGENCY:
BILLING CODE 9111–28–P
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Federal Register / Vol. 76, No. 62 / Thursday, March 31, 2011 / Notices
ACTION:
Notice.
This notice announces HUD’s
FHA Home Energy Retrofit Loan Pilot
Program (Retrofit Pilot Program or Pilot
Program) known as FHA PowerSaver.
The Consolidated Appropriations Act,
2010 directs HUD to conduct an Energy
Efficient Mortgage Innovation pilot
program targeted to the single family
housing market. The Retrofit Pilot
Program meets this statutory directive
and provides funding to support that
effort. The announcement of this pilot
program follows a November 10, 2010,
Federal Register notice in which HUD
submitted for public comment its
proposal to conduct the Retrofit Pilot
Program. This announcement of the
final structure of the Pilot Program takes
into consideration the public comments
received in response to the November
10, 2010, notice.
DATES: Effective Date: May 2, 2011May
2, 2011
FOR FURTHER INFORMATION CONTACT:
Patricia McBarron, Office of Single
Family Housing Development, Office of
Housing, Department of Housing and
Urban Development, 451 7th Street,
SW., Washington, DC 20410–8000;
telephone number 202–708–2121 (this
is not a toll-free number). Persons with
hearing or speech impairments may
access this number through TTY by
calling the toll-free Federal Information
Relay Service at 800–877–8339.
SUPPLEMENTARY INFORMATION:
SUMMARY:
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I. Background
On November 10, 2010 (75 FR 69112),
HUD published in the Federal Register
a notice that announced its proposal to
conduct the Retrofit Pilot Program. The
Consolidated Appropriations Act, 2010
(Pub. L. 111–117, approved December
16, 2009, 123 Stat. 3034) (2010
Appropriations Act), which
appropriated Fiscal Year (FY) 2010
funds for HUD, among other agencies,
appropriated $50 million for an Energy
Innovation Fund to enable HUD to
catalyze innovations in the residential
energy efficiency sector that have the
promise of replicability and help create
a standardized home energy efficient
retrofit market. Of the $50 million
appropriated for the Energy Innovation
Fund, the 2010 Appropriations Act
stated that ‘‘$25,000,000 shall be for the
Energy Efficient Mortgage Innovation
pilot program directed at the single
family housing market.’’ (See Pub. L.
111–117, at 123 Stat. 3089.)
As discussed in detail in the
November 10, 2010, notice, in
considering how to structure the pilot
program directed by the 2010
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11:23 Mar 31, 2011
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Appropriations Act, HUD looked to the
findings of the Administration’s
Recovery Through Retrofit Report,1
which specifically addressed retrofitting
homes for energy efficiency, and the
suitability of building the pilot program
by supplementing FHA’s Title I
Property Improvement Loan Insurance
program (Title I program). HUD
determined that both the
Administration’s Recovery through
Retrofit Report and FHA’s Title I
program provided the appropriate
foundation for structuring the Retrofit
Pilot Program. (See 75 FR 69113–
69114.) With respect to the Title I
program, HUD determined that utilizing
the existing FHA Title I program, with
additional grant funds and new
requirements, is the most efficient and
effective opportunity it could deploy to
deliver federally insured financing to
homeowners in markets that are ready
and able to utilize it.
FHA’s Title I program is authorized
by section 2 of Title I of the National
Housing Act (12 U.S.C. 1703), and its
regulations are codified in 24 CFR part
201.
II. The November 10, 2010, Proposal
As provided in the November 10,
2010, notice, FHA’s goals for the Retrofit
Pilot Program are: (1) To facilitate the
testing and scaling of a mainstream
mortgage product for home energy
retrofit loans that includes liquidity
options for lenders, resulting in more
affordable and widely available loans
than are currently available for home
energy retrofits; and (2) to establish a
robust set of data on home energy
efficiency improvements and their
impact—on energy savings, borrower
income, property value, and other
metrics—for the purpose of driving
development and expansion of
mainstream mortgage products to
support home energy efficiency retrofits.
After determining the viability of the
Title I program to achieve these goals,
FHA also determined that several
1 On October 19, 2009, the Administration
released the Recovery Through Retrofit Report (RTR
Report), which builds on the foundation laid out in
the American Recovery and Reinvestment Act (Pub.
L. 111–5, approved February 17, 2009) to expand
green job opportunities in the United States and
boost energy savings for middle class Americans by
retrofitting homes for energy efficiency. The White
House Council on Environmental Quality, along
with 12 federal departments and agencies
(including HUD) and 6 White House offices,
developed the report through an interagency
process. The RTR Report recognizes that the
funding of residential retrofit projects will help
create jobs for retrofit workers, while also helping
homeowners save money by lowering their utility
bills. The report can be found at http://
www.whitehouse.gov/assets/documents/
Recovery_Through_Retrofit_Final_Report.pdf.
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changes to the program are necessary for
the purposes of the Retrofit Pilot
Program. These changes are described in
detail in Section II.F. of the November
10, 2010, notice. (See 75 FR 69115).)
Broadly, the modifications to the Title I
regulations are intended to protect
consumers, provide low-cost financing,
and generate lender and secondary
market participation in home energy
retrofit loans.
In the November 10, 2010, notice,
HUD solicited public comment on the
proposed structure of the Retrofit Pilot
Program, and also invited interested
lenders to advise HUD of their interest,
as described in Appendix A of the
notice, so that HUD may contact them
and explore their interest and the
possibility of their participation in the
pilot program.
At the close of the public comment
period on December 27, 2010, HUD
received 49 public comments. HUD
reviewed the comments, which are
addressed in section IV of this notice,
and made some changes to the Retrofit
Pilot Program in response to public
comment and further consideration of
issues by HUD. The changes made to the
Retrofit Pilot Program are addressed in
Section III, which immediately follows.
III. Changes to the Proposed Retrofit
Pilot Program
HUD has made the following changes
to the November 10, 2010, notice:
1. Lender grant funds. The final notice
specifies all of the purposes for which
lenders may use grant funds. They are:
(1) Supporting costs associated with
creating or enhancing staffing and/or
systems necessary to deliver or report
on PowerSaver-insured loans; (2)
Funding costs of loan marketing,
origination, and/or underwriting; (3)
Offsetting costs associated with
appraisals and other approved methods
of property valuation; and (4) For
lenders that will also service their own
loans, reducing servicing costs.
In addition, this notice clarifies that
HUD grant funds may not be used to
directly subsidize or otherwise ‘‘writedown’’ the interest rate on PowerSaver
loans. Non-Federal grant funds may be
used for this purpose.
2. Eligible properties (definition of
‘‘single family property improvement
loans’’). This notice broadens the
definition of eligible properties to
include both attached and semidetached
single unit, owner-occupied principal
residences, in addition to detached
properties of that type. Further, HUD
has clarified that condominium units
that otherwise meet the criteria of an
eligible single family property are also
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Federal Register / Vol. 76, No. 62 / Thursday, March 31, 2011 / Notices
eligible properties under the pilot
program.
3. New eligible improvements. This
notice adds replacement windows that
meet the most recent Energy Star
specifications to the list of eligible
improvements that may be funded with
a PowerSaver loan.
4. Revisions to eligible improvements
listed in the November 10, 2010, notice.
This notice makes the following
revisions with respect to eligible
improvements listed in the November
10, 2010, notice:
a. Ground source heat pump systems
(instead of ‘‘geothermal heat pumps’’ as
in the November 10, 2010, notice) must
be installed in accordance with ANSI/
ACCA Standard 5 QJ–2010; and
b. Wind turbines must:
(i) Have a nameplate capacity of not
more than 100 kilowatts;
(ii) Have performance and safety
certification to:
• The International
Electromechanical Commission (IEC)
standards from an accredited product
certification body, or
• Certification to the American Wind
Energy Association (AWEA) standards
from the Small Wind Certification
Council (SWCC) or a nationally
recognized testing laboratory; and
(iii) Be installed by an installer with
North American Board of Certified
Energy Practitioners Small Wind
Installer Certification or small wind
turbine installation training from an
accredited training organization.
5. Use of loan proceeds to fund other
improvements. Section V.F.4(b) of the
notice also specifies that homeowners
may use up to 25 percent of PowerSaver
loan proceeds to fund, with certain
specified exceptions, property
improvements identified in Title I Letter
470 as eligible improvements under the
Title I program. A copy of Title I Letter
470 may be downloaded at: http://
www.hud.gov/offices/adm/hudclips/
letters/title1/index.cfm.
6. Property valuation. This notice
specifies that lenders may use a Fannie
Mae and Freddie Mac Form 2055
Exterior-Only Inspection Residential
Appraisal Report (most recent version)
to determine property value for the
purposes of establishing property
valuation. The notice also specifies that
lenders may be able to use Automated
Valuation Models (AVMs) to establish
property value for certain borrowers,
subject to FHA approval on a case-by
case basis. HUD will discuss this issue
further with lenders in the review of
their Expression of Interest. HUD notes,
however, that potential purchasers of
PowerSaver loans from originating
lenders may have additional or more
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11:23 Mar 31, 2011
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restrictive criteria regarding the use of
AVMs, which lenders seeking to sell
loans to such entities may be required
to meet.
7. Charges to borrower to obtain a
loan. This notice specifies the list of
charges and fees that may be charged in
connection with a PowerSaver loan and
which may be financed as part of a
PowerSaver loan.
8. Criteria for dealer loans. This
notice generally affirms that ‘‘dealer
loans’’ are not allowed as part of the
PowerSaver pilot. However, home
improvement contractors may provide
information to homeowners as to how
they may obtain a PowerSaver loan,
including the identity of lenders who
are participating in the program.
9. Insurance claim procedure. This
notice continues to provide that the
holder of the note will be accountable
to HUD for origination/underwriting
errors, and that the servicer will be
accountable to HUD for servicing errors,
as long as the servicer is a HUDapproved lender. However, based on
further internal HUD consideration on
how best to effectuate this requirement,
this notice clarifies that the insured
lender must enter into an agreement
with its servicer, under which the
servicer agrees to be liable to HUD for
such errors, and which identifies HUD
as a third-party beneficiary of such
agreement.
IV. Discussion of Public Comments on
the Proposed Retrofit Pilot Program
Comments were submitted by lenders
and representatives of the lending
industry; home performance contractors
and representatives of the home
performance/contracting industry
(including one pension fund); local
officials and representatives of state
energy agencies; environmental and
public health organizations; providers of
energy services and technologies;
community development financial
institutions; and members of the general
public. This section presents a summary
of the significant issues raised by the
commenters on the November 10, 2010,
notice and HUD’s responses to these
issues.
A. Comments on Geographic Scope
In listing the locations that received
funding under the Department of Energy
(DOE) Better Buildings program, all of
which are automatically eligible
locations for lenders to serve in the pilot
program, the Proposed Notice
inadvertently excluded Nashville,
Tennessee, from the list. This notice
corrects this error; Nashville is an
automatically eligible location for a
lender to serve under the pilot program.
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In addition, in December 2010, DOE
announced that the following State
Energy Programs were integrated into
BetterBuildings: Alabama, Maine,
Massachusetts, Michigan, Nevada,
Washington, and Virginia. As a result,
these states are automatically eligible
locations for lenders to serve under the
pilot program.
Finally, this notice provides that areas
where the Home Performance with
Energy Star program is available are
automatically eligible locations for
lenders to serve under the pilot
program.
Several commenters suggested that
certain communities that are not
covered under DOE’s Better Buildings
Program should be eligible markets for
lenders to serve in the pilot program. As
noted in the November 10, 2010, notice,
HUD strongly encourages lenders to
serve such markets, provided lenders
can demonstrate, through their
Expressions of Interest in participating,
that such locations are viable markets
for the deployment of PowerSaverinsured loans. On December 16, 2010,
HUD posted additional guidance on its
Web site to assist lenders in this area:
http://www.hud.gov/offices/hsg/sfh/
title/additionalsaverinformation.pdf.
B. Comments on Lender Eligibility
Several commenters recommended
that HUD allow institutions that may
not be FHA-approved lenders, such as
community development financial
institutions and state energy agencies, to
be eligible lenders under the pilot
program. HUD hopes and expects that a
wide range of entities will express
interest in participating in the pilot
program, including entities that have
not participated in FHA programs in the
past. However, as required by the
National Housing Act, any entity that
wishes to make loans insured by FHA
under the pilot program must hold a
valid Title I contract of insurance and be
approved by the Secretary. HUD notes
that approved Title II lenders may
obtain Title I eligibility under an
expedited process.
C. Comments on Lender Grant Funds
Several commenters suggested uses of
the incentive grant funds available to
lenders under the pilot program in
addition to the uses specified in the
November 10, 2010, notice. Some
commenters recommended allowing
grant funds to be used to support a
lender’s costs associated with creating
or enhancing systems necessary to
deliver PowerSaver loans.
HUD agrees with this suggestion and
this notice specifies that such use is
allowed with grant funds under the
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pilot program. In addition, this notice
specifies that lenders may use grant
funds to offset costs associated with
appraisals.
Several commenters suggested that
HUD grant funds be available to lenders
to set up loan loss reserves. Due to the
current insurance structure, HUD does
not view this as a viable or optimal use
of HUD grant funds for the purposes of
the pilot program and declines to make
this change. HUD notes that many
communities have access to other funds
through DOE and other sources that may
be available for such purposes. HUD is
encouraging lenders to work in
partnership with other entities through
the pilot program and will evaluate
lender Expressions of Interest to
participate in part on the extent to
which lenders propose to do so. HUD’s
intention is to provide lenders the
flexibility to use funds so long as any
use delivers demonstrable benefit to
borrowers, such as by making loans
more affordable or available. One
commenter recommended that HUD
ensure that lenders who propose to use
grant funds to lower the interest rate on
PowerSaver loans they originate do not
‘‘over subsidize’’ loans. HUD will work
closely with each lender to size and
scope the lender’s grant payments so
that the payments have the most
beneficial impact in the market. As
stated in the November 10, 2010, notice,
the amount of payment to each lender
and the eligible uses of funds by each
lender will be determined by HUD
based on the lender’s Expression of
Interest. A significant factor in
determining payment amounts to each
lender will be the number of loans the
lender anticipates making during the 2year period of the pilot program.
Lenders were required to report to HUD
on their use of incentive payments
funds.
D. Comments on Selection of Lenders
One commenter recommended that
HUD require lenders to secure the
approval of their Expressions of Interest
from ‘‘existing energy efficiency program
officials’’ before submitting them to
HUD and suggested HUD share
Expressions of Interest with ‘‘state
energy offices’’ in states that each lender
proposes to serve. HUD declines to
make this change, as lender Expressions
of Interest are nonbinding, and so may
change as lenders finalize the details of
their participation in discussions with
HUD, and may contain proprietary
information. The same commenter
encouraged HUD to ensure participating
lenders collaborate closely with state
energy efforts and other initiatives that
are currently supporting home energy
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improvements in markets the lender
proposes. HUD does in fact intend to do
this, as suggested in the November 10,
2010, notice (with reference to the
importance of partnerships with public
sector agencies), and will evaluate
lender Expressions of Interest in part on
this basis.
E. Comments on Eligible Properties
(Definition of ‘‘Single Family Property
Improvement Loans’’)
Several commenters recommended
broadening the definition of eligible
properties under the pilot program. The
following property types were
recommended: attached and
semidetached single unit, owneroccupied principal residences;
manufactured homes; and multifamily
properties. HUD agrees with the
suggestion to allow attached and
semidetached single unit, owneroccupied principal residences, in
addition to detached properties of that
type. Such properties are fully within
any common definition of ‘‘single family
housing’’ and represent an important
segment of the housing stock in many
communities. This notice reflects this
change. Further, HUD has clarified that
condominium units that otherwise meet
the criteria of an eligible single family
property are also eligible properties
under the pilot program.
HUD declines to make further changes
to eligible property types. HUD fully
agrees with the statements by
commenters that many manufactured
homes and multifamily properties and
their residents would benefit from
energy improvements. However, as
noted in the November 10, 2010, notice,
the PowerSaver pilot program is being
implemented under the statutory
directive from Congress to create a pilot
program directed at the single family
housing market.2 HUD also notes that
other HUD programs are designed to
support manufactured and multifamily
housing.
F. Comments on Eligible Use of Loan
Proceeds
Several commenters addressed the
subject of eligible uses of loan proceeds.
Some commenters recommended that
the list of eligible improvements
directly related to home energy
performance be revised and expanded.
Others recommended that HUD allow
borrowers flexibility to use loan
proceeds to fund costs associated with
improvements that are not on the list.
With respect to the first set of
2 The Consolidated Appropriations Act, 2010
(Pub. L. 111–117, approved December 16, 2009, 123
Stat. 3034). Specifically, see Public Law 111–117,
at 123 Stat. 3089.
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comments, HUD has made a revision to
the list of eligible improvements.
Specifically, this notice adds
replacement windows that meet the
most recent Energy Star specifications to
the list of eligible improvements that
may be funded under the PowerSaver
program.
In addition, this notice makes the
following revisions with respect to
eligible improvements on the list
provided in the November 10, 2010,
notice:
1. Ground source heat pump systems
(instead of ‘‘geothermal heat pumps’’ as
in the November 10, 2010, notice) must
be installed in accordance with ANSI/
ACCA Standard 5 QJ–2010; and
2. Wind turbines must:
(a) Have a nameplate capacity of no
more than 100 kilowatts;
(b) Have performance and safety
certification to:
• The IEC standards from an
accredited product certification body, or
• Certification to the AWEA standard
from the SWCC or a nationally
recognized testing laboratory; and
(c) Be installed by an installer with
North American Board of Certified
Energy Practitioners Small Wind
Installer Certification or small wind
turbine installation training from an
accredited training organization.
Other commenters recommended that
the list of eligible improvements include
‘‘home energy management systems’’
and ‘‘home lighting systems.’’ HUD
declines to make these changes. While
HUD agrees that improvements
consistent with these terms can improve
home energy performance, Title I Letter
470 provides that property improvement
for the purposes of the program must
‘‘[i]n general * * * be permanent, hard
wired or hard plumbed to the property.’’
Another commenter recommended
stronger and more prescriptive
requirements with respect to insulation,
sealing, skylights, and air conditioning
systems. HUD declines to make these
changes. HUD believes that these
recommendations generally represent a
more aggressive set of requirements than
is reasonable and necessary to apply
across the board to a national pilot
program. HUD recognizes that in every
area of energy-related home
improvements, technology and practice
is continually improving. At this early
stage in the development of a market for
energy efficient home improvements,
HUD believes the list of eligible
improvements as revised in this notice
strikes the right balance between
improving home energy performance
and ensuring a sufficiently broad range
of homeowners and communities can
benefit from the pilot program.
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One commenter recommended that
power purchase agreements (PPAs) or
contracts with third-party owners to use
electricity generated by on-site
photovoltaic systems, be allowed as
eligible improvements, subject to certain
conditions. HUD is supportive of
innovative efforts to expand the
deployment of clean energy in the
residential sector, specifically including
through PPAs, subject to certain
borrower disclosures and protections.
The recommendation represents a
broader interpretation than generally
has been made of the term ‘‘property
improvement.’’ (The Title I program on
which the pilot program is based is
authorized to support property
improvements.) HUD believes that this
proposed recommendation is worthy of
further consideration and is interested
in better understanding the
underwriting and operational issues,
whether the recommendation is an
eligible activity under the Title I
program, and the risks and protections
for homeowners as well as FHA. While
HUD declines to make the
recommended change at this time, it
may reconsider this decision in the
future based on additional analysis.
With respect to recommendations
regarding more flexible use of loan
proceeds, HUD agrees with commenters
that flexibility is appropriate and likely
necessary to encourage and enable many
homeowners to fund home energy
improvements, which many will likely
do as part of a broader remodeling or
renovation of their home. HUD also
agrees with one commenter that
suggested it would be important to
ensure homeowners can make basic
health and safety-related improvements
at the time of a home energy
improvement job. At a nascent stage of
consumer awareness and interest in
home energy improvements, HUD
believes it is important to make
financing products as appealing and
marketable as possible, while
maintaining the focus on the policy goal
of more energy efficient homes. HUD
notes that leading state and local home
energy improvement loan programs, as
well as the Fannie Mae Energy Loan
product, allow significant flexibility in
the use of loan proceeds on this basis.
Section V.F.4(b) of this notice
specifies that homeowners may use up
to 25 percent of PowerSaver loan
proceeds to fund certain property
improvements identified in Title I Letter
470 as eligible improvements under the
Title I program. A copy of Title I Letter
470 may be downloaded at: http://
www.hud.gov/offices/adm/hudclips/
letters/title1/index.cfm.
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HUD recognizes that such flexibility
may add some complexity to aspects of
the evaluation of the pilot program.
However, HUD believes the reporting
requirements of the program, which will
generate data on the specific energy
improvement measures funded with
each loan, will be sufficient to meet the
evaluation goals in this area.
Also with respect to eligible uses of
loan proceeds, several commenters
recommended that HUD require that
homeowners avail themselves of a home
energy audit or rating to be eligible for
a PowerSaver loan. HUD declines to
require audits/ratings in connection
with PowerSaver loans at this time.
Audit/rating approaches, protocols,
technologies, and data appear to vary
substantially. HUD is concerned that
there is not an industry consensus or
uniform standard for energy audits/
ratings. (HUD notes that one commenter
suggested such standards are in
development by one industry group and
may be available in early 2011; HUD
will be interested in following this
development.) DOE is currently piloting
the new Home Energy Score program,
which includes an energy audit
component. Once the Home Energy
Score pilot program is complete, HUD
may revisit the required use of an
energy audit. In addition, it is HUD’s
understanding that comprehensive
audits/ratings can cost as much as $500,
adding a significant additional expense;
one commenter suggested allowing the
cost of audits to be financed as part of
the PowerSaver loan. For these reasons,
a required audit or rating, as
recommended, may disadvantage
certain homeowners and communities.
HUD generally agrees with these
commenters that audits/ratings can
enable homeowners to better
understand the most cost effective
energy savings improvements for their
particular home. For these reasons, the
November 10, 2010, notice strongly
encouraged the use of audits; this notice
affirms this encouragement.
Furthermore, as suggested in the
November 10, 2010, notice, HUD will
consider the extent to which audits will
be required or encouraged by lenders in
lender Expressions of Interest to
participate in the pilot program. In
addition, this notice allows the cost of
an energy audit/rating to be financed as
part of the PowerSaver loan.
G. Comments on Property Valuation
Several commenters addressed the
property valuation requirement, which
is necessary to ensure homeowners do
not have total mortgage debt (including
the PowerSaver loan) in excess of the
current value of their home at the time
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of PowerSaver loan origination. One
commenter recommended that HUD
allow lenders to use a Fannie Mae and
Freddie Mac Form 2055 Exterior-Only
Inspection Residential Appraisal Report,
on which the November 10, 2010, notice
specifically solicited comment. This
notice adopts this recommendation.
Some commenters also recommended
that Automated Valuation Models
(AVMs) be allowed for use in
establishing property valuation. HUD
recognizes that AVMs can be an
effective tool in certain markets and
may be appropriate to use with respect
to borrowers who have built some
equity in their homes. The notice
specifies that lenders may use AVMs to
establish property value for certain
borrowers, subject to FHA approval, on
a case-by-case basis. HUD will discuss
this issue further with lenders in the
review of their Expression of Interest.
Some commenters raised the concern
that appraisals would add inordinate
cost to a PowerSaver loan and to the
time to close a loan. HUD is sensitive to
this concern and agrees that the cost and
time associated with appraisals may
pose a challenge to the marketability of
PowerSaver loans. The availability of
various options for determining
property valuation, as noted above,
addresses this concern. A sound basis
for determining property value is
essential for determining a borrower’s
combined-loan-to-value ratio and for
establishing PowerSaver loans as viable
for capital markets investment and
liquidity, which is a stated goal of the
pilot program. As noted above, lenders
may propose to use incentive grant
funds to offset costs associated with
appraisals and other approved methods
of property valuation. In addition, this
notice specifies that appraisal costs may
be financed as part of the PowerSaver
loan.
Some commenters recommended that
an energy audit suffice for establishing
the property value. HUD declines to
makes this change, as energy audits are
not currently recognized by the housing
finance industry as a viable tool for
determining home value. HUD is
interested in working with stakeholders
and exploring the extent to which
energy audits may be able to provide
reliable information to inform
determinations of home value and
borrower ability to afford and repay
mortgage loans. Finally, one commenter
suggested that an audit should eliminate
an appraisal requirement for an
unsecured PowerSaver loan. The notice
clarifies that, as under the Title I
Property Improvement program,
PowerSaver loans of less than $7,500 are
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not required to be secured and appraisal
is not required for such loans.
H. Credit Requirements for Borrowers
Some commenters recommended
modest tightening or relaxing of the
minimum credit score and maximum
total debt-to-income for borrowers
receiving PowerSaver loans. HUD
declines to make any changes to these
features of the program at this time.
Homeowners’ response and loan
performance, among other factors,
during the pilot program may warrant
adjustments to credit requirements in
the future.
I. Requirements for Dealer Loans
Several commenters suggested that
HUD allow ‘‘dealer loans,’’ as defined by
the FHA Title I Property Improvement
Home Loan program, be allowed under
the PowerSaver pilot program. The Title
I Property Improvement Home Loan
program regulations at § 201.2 define a
‘‘dealer loan’’ as ‘‘a loan where a dealer,
having a direct or indirect financial
interest in the transaction between the
borrower and the lender, assists the
borrower in preparing the credit
application or otherwise assists the
borrower in obtaining the loan from the
lender.’’ HUD agrees with these
commenters that responsible home
improvement contractors can be
effective in educating homeowners
about home energy loan financing
options, which is typically important to
maintaining homeowner interest in a
financing option.
While HUD declines to make this
change, home improvement contractors
may provide information to
homeowners as to how they may obtain
a PowerSaver loan, including the
identity of lenders who are participating
in the program.
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J. Evaluating the Success of the Retrofit
Pilot Program
Several commenters made
recommendations regarding HUD’s
planned evaluation of the PowerSaver
pilot program. Some suggested that
HUD require homeowners to sign a
disclosure in connection with a
PowerSaver loan to allow access to preand post-installation utility bill
information. HUD recognizes the
importance of accessing utility bill
information and is exploring options for
accessing it in a manner that ensures
homeowner privacy. This notice does
not require homeowners to provide
utility bill information; HUD will
discuss this issue individually with
participating lenders in the review of
lender Expressions of Interest.
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One commenter suggested that HUD
participate in efforts by DOE, the
Environmental Protection Agency, and
industry groups to develop metrics and
standards for data collection and
program evaluation and to coordinate to
the extent feasible with DOE’s Home
Energy Score Pilot Program. HUD
appreciates and agrees with this
recommendation and has already been
in discussions along these lines with
DOE and others.
K. Other Comments
Several commenters recommended
increasing the maximum loan amounts
overall or with respect to unsecured
loans. HUD declines to make changes to
the loan limits. HUD believes that the
$25,000 loan limit is sufficient to cover
all or most of the cost of a
comprehensive retrofit or the cost of a
renewable energy system—and in the
latter case a variety of subsidies and
incentives are available to fund costs
that the loan cannot. With respect to
unsecured loans, the primary purpose of
the PowerSaver pilot program is to
establish the viability of a mainstream
mortgage product for home energy
improvement loans; unsecured loan
products and credit card options of
various types are already available in
the market. Because the current Title I
Property Improvement Home Loan
program does not require loans under
$7,500 to be secured, primarily because
it would add infeasible cost to such
small loans, HUD is retaining that
feature, with no change, and no
additional incentives to originate (as
one commenter recommended) in the
PowerSaver pilot program.
Some commenters broadly suggested
that HUD require contractors who
perform home energy improvements
funded by PowerSaver loans to be
certified on some basis or that broader
‘‘quality assurance’’ procedures be
required. HUD is sympathetic to the
concerns expressed by the commenters
and generally agrees that high quality
assurance procedures can enhance the
prospects that a home improvement job
will be performed properly and
professionally. HUD understands that a
number of communities implementing
comprehensive home energy
improvement programs are imposing or
incentivizing such requirements.
HUD will ask lenders that submit
Expressions of Interest in participating
in the program to describe the extent to
which contractor certification and
overall quality assurance is reflected in
programs serving the lender’s proposed
target market(s) and will evaluate
Expressions of Interest in part on this
basis. In addition, HUD will encourage
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17941
lenders to adopt sound practices in this
area. Such practices include:
(1) Verification that contractors have
demonstrated business experience as
home improvement contractors;
(2) Documentation on file of basic
information such as trade name, places
of business, type of ownership, type of
business, and names and employment
histories of the owners and staff;
(3) Provision of current financial
statement prepared by someone who is
independent of the contractor and is
qualified by education and experience
to prepare such statements, and a
commercial credit report on the
contractor;
(4) Procedures for supervising and
monitoring contractors’ activities with
respect to loans insured under the Pilot
Program; and
(5) Evidence of homeowner
satisfaction with work performed by the
contractor under the Pilot Program.
HUD declines to make these or other
quality assurance requirements
mandatory, however. HUD believes that
such a requirement would add
unnecessary administrative burden on
lenders in the Pilot Program. In
addition, HUD expects that it will be
able to work closely with lenders, as
well as local communities, to monitor
and help ensure quality assurance under
the Pilot Program given that only a
limited number of lenders will
participate. In addition, HUD may
revisit the issue of quality assurance
during its evaluation of the pilot
program to determine whether changes
should be made to the Pilot Program
along the lines suggested by the
commenters.
Several commenters encouraged HUD
to implement a ‘‘streamlined application
procedure’’ for PowerSaver loans. HUD
recognizes the importance of ensuring
homeowners can close on PowerSaver
loans in a timely manner. HUD will
utilize the Title I Property Improvement
Home Loan program platform and
system for the PowerSaver pilot
program. This system, while different
from the system used for FHA Title II
loan products, should enable lenders to
make a timely turnaround of loan
applications. In addition, HUD will
consider lenders’ expected loan
procedures and expected turnaround
time in evaluating their Expressions of
Interest to participate in the pilot
program.
One commenter suggested that HUD
allow PowerSaver loans to be in third
lien position in cases where the
borrower has a home mortgage loan in
first position, a home equity loan in
second position, and sufficient home
equity to take on a PowerSaver loan
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without exceeding 100 percent
combined loan to value. HUD declines
to make this change; the Title I
regulations at 24 CFR 201.24(a)(1)(iii)
specify that, in general, liens securing
Title-insured loans ‘‘need not be a first
lien on the property; however the lien
securing the Title I loan must hold no
less than the second lien position.’’ The
regulations authorize a Title I loan to
hold a third lien position in specified
limited circumstances: (1) Where the
first and second mortgage were made at
the same time; or (2) the second
mortgage was provided by a state or
local agency in conjunction with a
downpayment assistance program.
V. The Home Energy Retrofit Loan Pilot
Program (FHA PowerSaver)
A. Authority
The Retrofit Pilot Program is
authorized by the Energy Innovation
Fund of the 2010 Appropriations Act,
which directs HUD to conduct an
Energy Efficient Mortgage Innovation
pilot program targeted to the single
family housing market (Pub. L. 111–117,
at 123 Stat. 3089). The Pilot Program is
based on the requirements of Title I,
section 2 of the National Housing Act
(12 U.S.C. 1703). Under section 2(a) of
the National Housing Act, HUD is
authorized to provide loan insurance in
order to help homeowners finance
alterations, repairs, and improvements
in connection with existing structures or
manufactured homes. HUD’s
implementing regulations are codified at
24 CFR part 201.
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B. Duration and Geographic Scope
1. Duration. The Retrofit Pilot
Program will be conducted for loans
originated during a period of 2 years
commencing on May 2, 2011. HUD,
however, may extend the duration of the
Pilot Program, after its commencement,
beyond the 2-year period to accurately
assess the Pilot’s effectiveness. In
making such determination, HUD will
look closely at the results of its
evaluation of the program as described
in Section VI of this notice. HUD will
announce any such extension through
Federal Register notice.
2. Geographic scope. The success of
the Retrofit Pilot Program and its
potential to inform further efforts to
expand financing for energy efficient
home retrofits will be advanced by
focusing on properties located in
communities that have already taken
affirmative steps to address energy
efficiency retrofits. HUD is aware that a
number of communities have already
developed the programmatic
infrastructure to help ensure that the
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critical nonfinancial components of a
holistic retrofit initiative are in place. In
selecting communities in which to
conduct the Pilot Program, HUD will
target communities that have already
developed a robust home energy
efficiency retrofit infrastructure.
DOE’s Energy Efficiency and
Conservation Block Grants (EECBG)
program is authorized under Title V,
Subtitle E of the Energy Independence
and Security Act (EISA), signed into law
on December 19, 2007. Through formula
and competitive grants administered by
DOE, this program empowers local
communities to make strategic
investments to meet the Nation’s longterm goals for energy independence and
leadership on climate change.
With funding for the EECBG program
provided by the American Recovery and
Reinvestment Act, DOE initiated the
Retrofit Ramp-up Program, now known
as the Better Buildings program, a
demonstration program directed to
stimulating activities and investments
that can: (1) Deliver verified energy
savings from a variety of projects in the
local jurisdiction of the applicant, with
a particular emphasis on efficiency
improvements in residential,
commercial, industrial, and public
buildings; (2) achieve broader market
participation and greater efficiency
savings from building retrofits; (3)
highly leverage grant funding in order to
significantly enhance the resources
available for supporting the program; (4)
sustain themselves beyond the grant
monies and the grant period by
designing a viable strategy for program
sustainability; (5) serve as pilot
building-retrofit programs that
demonstrate the benefits of gaining
economy of scale; and (6) serve as
examples of comprehensive communityscale energy-efficiency approaches that
could be replicated in other
communities across the country.
Under the Better Buildings Program,
approximately $485 million was
allocated by DOE through competitive
grants to initiatives in the following
locations: Austin, TX; Berlin,
Cambridge, Chestertown, Cumberland,
Denton, Easton, Elkton, Frostburg,
Oakland, Princess Anne, Dundalk,
Westminster, Havre de Grace, Salisbury,
Takoma Park, and University Park, MD;
Fayette County, PA; Bedford, NY;
Berlin, Nashua, and Plymouth, NH;
Boulder County, City and County of
Denver, Garfield County, and Eagle
County, CO; Camden, NJ; Chicago
region, IL; Cincinnati, Ohio, and
northeast Kentucky; a consortium of 14
Connecticut Towns: Bethany, Cheshire,
East Haddam, East Hampton,
Glastonbury, Lebanon, Mansfield,
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Portland, Ridgefield, Weston, Westport,
Wethersfield, Wilton, and Windom;
Detroit, Grand Rapids, and southeast
MI; Greensboro, NC; Indianapolis and
Lafayette, IN; Kansas City, MO; Los
Angeles, San Francisco Bay Area,
Sacramento, San Diego, and Santa
Barbara County, CA; Lowell, MA;
Madison, Milwaukee, and Racine, WI;
Maine statewide; Missouri statewide;
Nashville, TN; New York statewide;
Omaha and Lincoln, NE; Oregon
statewide; Philadelphia, PA; Phoenix,
AZ; Riley County, KS; San Antonio, TX;
Seattle, and Bainbridge Island, WA;
select Southeastern cities: Atlanta, GA;
Carrboro, Chapel Hill, and Charlotte,
NC; Charleston SC; Charlottesville, VA;
Decatur, GA; Hampton Roads/Virginia
Beach, VA; Huntsville, AL; Jacksonville,
FL; New Orleans, LA; Toledo, OH; and
the U.S. Virgin Islands. In addition, in
December 2010, DOE announced that
the following State Energy Programs
were integrated into BetterBuildings:
Alabama, Maine, Massachusetts,
Michigan, Nevada, Washington, and
Virginia.
The locations listed above are all
eligible markets for lenders to serve in
the Pilot. In addition, this notice
provides that areas where the Home
Performance with Energy Star program
is available are automatically eligible
locations for lenders to serve under the
pilot program. Those areas are listed
here: http://www.energystar.gov/
index.cfm?c=home_improvement.hm_
improvement_hpwes_partners.
FHA will consider lenders’ interest in
other communities, subject to an
assessment of such communities’
infrastructure for implementing
residential retrofit programs. As noted
in the November 10, 2010, notice, HUD
strongly encourages lenders to serve
such markets, provided lenders can
demonstrate, through their Expressions
of Interest in participating, that such
locations are viable markets for the
deployment of PowerSaver-insured
loans. On December 16, 2010, HUD
posted additional guidance on its Web
site to assist lenders in this area:
http://www.hud.gov/offices/hsg/sfh/
title/additionalsaverinformation.pdf.
HUD expects to consult with DOE in
such cases.
HUD considered targeting the pilot to
a smaller number of markets, which
may have increased the likelihood of
lender competition within some
markets, potentially benefitting
consumers. HUD determined that such
an approach could limit the number and
diversity of lenders that could
participate in the program overall,
however. HUD determined it was
important for the Pilot to be open to a
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reasonably wide range of lenders—by
size and type, as well as service area—
especially given the challenging
conditions facing lenders in the current
environment, which may create barriers
to participation for some, even if
interested. In selecting lenders to
participate, HUD will evaluate the
extent to which lenders intend to
provide loans at the most favorable rate
to consumers, thus directly addressing a
major benefit that lender competition
would potentially foster.
C. Lender Eligibility
Lender participation in the Retrofit
Pilot Program is voluntary. Of the pool
of interested lenders that meet the
criteria described in Section II of the
November 10, 2010, notice and
reiterated below, HUD intends to select
a limited number of lenders to
participate in the Retrofit Pilot Program.
HUD is currently undertaking efforts to
identify FHA-approved lenders that may
be suitable candidates for participation
in the Retrofit Pilot Program. HUD
reserves the right to terminate a lender’s
participation in the Retrofit Pilot
Program for unacceptable performance.
Examples of unacceptable lender
performance could include violating the
program’s underwriting and credit
criteria, failing to meet HUD reporting
requirements, and high defaults among
originated loans under the program. To
be eligible, lenders must satisfy the
following criteria:
1. Approval as an FHA Title I or Title
II program lender. Lenders must hold
valid Title I contracts of insurance and
be approved pursuant to the
requirements of 24 CFR part 202 to
originate, purchase, hold, service, or sell
loans insured under the Title I program
regulations at 24 CFR part 201.
However, approved Title II lenders may
obtain Title I eligibility under an
expedited process by contacting HUD
and submitting the Title I approval
package described at http://
www.hud.gov/offices/hsg/sfh/lender/
title1ap.cfm.
2. Experience with similar lending
initiatives. Lenders must be able to
demonstrate experience with the type of
lending initiative being undertaken in
the Retrofit Pilot Program. In particular,
HUD will consider the extent to which
lenders have experience in successfully
originating and/or servicing small loans,
home equity loans, second liens, FHA
section 203(k) rehabilitation loans, and
Title I Property Improvement Loans.
Lenders that do not have experience in
such lending may still be able to
participate in the Pilot Program to the
extent they can demonstrate how their
other experience is relevant to
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determining their ability to participate
in the pilot, and provided they agree to
meet the Title I requirements before
participation in the pilot program.
3. Computer system capabilities.
Lenders must have the technical
capability to interface with FHA
through FHA Connection. In addition,
lenders must have the technical
capability to interface with any other
computer systems utilized by FHA or its
contractors pertaining to the Retrofit
Pilot Program.
4. Audit capabilities. Lenders must
have a demonstrated capacity to provide
timely reports to FHA on origination
and performance of retrofit loans. FHA
envisions requiring monthly reports on
loan and portfolio performance. In
addition, a lender must be able to
provide an electronic loan package to
HUD for a random sample of loans
chosen for quality reviews.
5. Collaborative capacity. Lenders
must have demonstrated capacity to
work with public sector agencies,
nonprofit organizations, and utilities or
home improvement contractors.
D. Lender Grant Funds
HUD recognizes that even with
federal mortgage insurance such as
would be available under the Pilot
Program, small loans for home energy
retrofits may have relatively high
transaction costs for lenders,
discouraging some from offering such
loans and forcing others that do offer
them to increase costs to borrowers.
HUD will utilize the appropriated funds
provided under the 2010
Appropriations Act to provide lender
incentive payments to support activities
that lower costs to borrowers. Eligible
uses of such payments are: (1)
Supporting costs associated with
creating or enhancing staffing and/or
systems necessary to deliver or report
on PowerSaver insured loans; (2)
Funding costs of loan marketing,
origination, or underwriting; (3)
Offsetting costs associated with
appraisals and other approved methods
of property valuation; and (4) For
lenders that will also service their own
loans, reducing servicing costs.
HUD will also consider other
proposed uses of such funds. Any use
of funds must show, to HUD’s
satisfaction, bona fide benefit to
borrowers. The amount of payment to
each lender and the eligible uses of
funds by each lender will be determined
by HUD based on the lender’s
Expression of Interest. A significant
factor in determining payment amounts
to each lender will be the number of
loans the lender anticipates making
during the 2-year period of the Pilot
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Program. Lenders will be required to
report to HUD on their use of incentive
payment funds. HUD anticipates that
the amount of grant funds will not
exceed $5 million per lender.
In addition, this notice clarifies that
HUD grant funds may not be used to
directly subsidize or otherwise ‘‘write
down’’ the interest rate on PowerSaver
loans. Non-Federal grant funds may be
used for this purpose.
Grant funds may be available to
lenders who request them, but are not
required for participation. Lenders who
do not seek funds may still participate
in the Pilot Program.
E. Selection of Lenders
As noted above, lenders interested in
potentially participating in the Retrofit
Pilot Program were required to submit
an Expression of Interest using the
template in Appendix A and by
following the instructions provided in
the November 10, 2010, notice.
In evaluating Expressions of Interest
and selecting lenders to participate,
HUD will first review each Expression
of Interest to verify that the lender is
eligible to participate in the program.
HUD will then evaluate the Expressions
of Interest from all eligible lenders
primarily by weighing the following
factors in the Expression of Interest: (1)
The lender’s anticipated loan volume
and target markets; (2) the lender’s
business model for participating in the
pilot; (3) the lender’s capacity
(experience and/or potential) to work in
public-private partnerships; and (4) the
extent to which the lender intends to
deliver the most favorable loan product
to consumers. HUD anticipates that
these primary weighting factors will
have generally equal weighting
significance. In addition, HUD may
consider the following factors in
selecting lenders to participate: (1)
Diversity of lender type and target
market; and (2) impact on low-income
households and communities.
F. Differences Between Retrofit Pilot
Program and Existing Title I Program
With the exceptions discussed below,
the Retrofit Pilot Program will be
governed by the Title I program
regulations at 24 CFR part 201. This
notice does not make any changes to the
current Title I Property Improvement
Program. The differences specified in
this notice are only applicable to
lenders selected to participate in the
Pilot Program.
Lenders selected to participate in the
Retrofit Pilot Program must enter into a
Retrofit Pilot Program Agreement by
which they commit to adhere to the
Title I program regulations, except as
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modified in this notice and in
subsequent refinements, such
modifications being applicable only to
loans insured under the Retrofit Pilot
Program. There will also be other
requirements applicable to the Retrofit
Pilot Program; for example, insuring
Retrofit Pilot Program loans only in
communities selected for the Pilot
Program.
In summary, the changes described
below, in combination with the
appropriated funds, have the effect of
creating an innovative pilot program
that accords with Congress’ direction in
the Act. These changes fall into the
following categories: (1) Changes
designed to enhance underwriting of
program loans; (2) changes related to
FHA administration of the program,
specifically in the areas of loan
servicing, claim procedures, and
reporting; (3) changes to target the pilot
program specifically for its purpose of
improving home energy performance;
and (4) changes to provide additional
benefits to borrowers. Finally, as noted,
FHA will augment these changes with
grant funds for lenders, using funding
appropriated under the 2010
Appropriations Act. In summary, these
changes adjust the current flexible
framework for the Title I program to
enable it to encourage and directly
support home improvements that
improve energy performance, while
reducing barriers to making financing
under the program more widely
available and more affordable.
1. Definition 24 CFR 201.2. For
purposes of the Retrofit Pilot Program,
the following terms have the following
meanings.
a. Single family property improvement
loans. Only ‘‘single family property
improvement loans’’ as that term is
defined in 24 CFR 201.2 are eligible for
FHA insurance and the Retrofit Pilot
Program. Properties must also be
principal residences as defined in 24
CFR 201.2. For purposes of the Retrofit
Pilot Program, the term includes
detached, semidetached, and attached
single family properties. Condominium
units that otherwise meet the criteria of
an eligible single family property are
also eligible properties under the pilot
program.
Loans used to finance the property
improvements for manufactured homes
and multifamily properties 3 are not
eligible for the Retrofit Pilot Program,
but remain eligible for Title I program
insurance under 24 CFR part 201.
3 Manufactured home improvement loan and
multifamily property improvement loan are terms
defined in § 201.2.
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2. Loan maturities (24 CFR 201.11).
Under the Title I program regulations at
24 CFR 201.11 an insured loan may
have a term as long as 20 years. Under
the Retrofit Pilot Program, loan terms
generally will be limited to 15 years to
better align the term of financing with
the useful life of, and benefits from,
most energy retrofit improvements.
Under the Pilot Program, loan terms that
are for 20 years can be used only for
certain specified improvements:
renewable energy measures, ground
source heat pump systems, and other
improvements as approved by HUD. See
‘‘Eligible use of loan proceeds’’ in
Section V.D.4(b) below.
3. Interest and discount points (24
CFR 201.13). Under the Title I program
regulations at 24 CFR 201.13, the lender
may not require or allow any party,
other than the borrower, to pay discount
points or other financing charges in
connection with the loan transaction.
This restriction, while helping to assure
that borrowers have a personal stake in
the repayment of the loan, also has the
effect of hindering state and local efforts
to support home energy retrofits by
lowering the cost of capital to
consumers, such as through interest rate
write-downs. The Retrofit Pilot Program
expressly contemplates that third
parties (including state and local
governments, private organizations, and
nonprofit organizations) may pay
discount points or other financing
charges in connection with the Title I
loan transaction and encourages third
parties to work with participating
lenders on this basis. In addition, as
noted, lenders may utilize HUD
incentive payments for this purpose
under the Pilot Program.
The interest shall be calculated on a
traditional mortgage interest basis.
4. Property improvement loan
eligibility (24 CFR 201.20).
a. Borrower eligibility (24 CFR
201.20(a)). As under Title I loans,
Retrofit Pilot Program borrowers shall
have at least a one-half interest in one
of the following:
(i) Fee simple title of the property; or
(ii) A properly recorded land
installment contract.
Unlike the Title I program, lessees of
the property will not be eligible to
participate in the Pilot Program. The
limitation of eligibility to owneroccupied properties is designed to
reduce the variables in the Pilot
Program for purposes of evaluation, as
well as to help ensure compliance with
the minimum property loan-to-value
ratios described in section V.F.5. below.
b. Eligible use of the loan proceeds (24
CFR 201.20(b)). Similar to the Title I
program, loan proceeds shall be used
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only for the purposes disclosed in the
loan application. Under the standard
Title I loan, proceeds shall be used only
to finance property improvements that
substantially protect or improve the
basic livability or utility of the property.
Further, HUD has established a list of
items and activities that may not be
financed with the proceeds of any
property improvement loan.
A list of eligible measures is attached
as an appendix to this notice.
Homeowners may use up to 25 percent
of the PowerSaver loan proceeds to
fund, with the following exceptions, any
property improvement that is identified
in Title I Letter 470 as an eligible
improvement under the Title I program.
The following property improvements,
although listed in Title I Letter 470 as
eligible improvements under the Title I
program, are not eligible for funding
with PowerSaver loan proceeds:
• Barns
• Boathouses
• Boatslips
• Bookcases (built-in)
• Cabinets (unless the improvement
would result in health benefits)
• Choir lofts
• Decks, Gazebos
• Docks
• Door chimes
• Driveways
• Lattice work
• Piers
• Porches
• Safes/vaults
A copy of Title I Letter 470 may be
downloaded at: http://www.hud.gov/
offices/adm/hudclips/letters/title1/
index.cfm. If a lender has any doubt as
to the eligibility of any item or activity,
the lender must request a determination
from FHA before making a loan. HUD
strongly encourages the use of home
energy audits and other tools to enable
consumers to determine the most
beneficial improvements they should
seek to undertake.
5. Property valuation (24 CFR 201.20).
The combined loan-to-value ratio of any
previously existing mortgage and
PowerSaver loan cannot exceed 100
percent. As under the Title I Property
Improvement program, this requirement
does not apply in cases involving
PowerSaver loans of less than $7,500
and not secured by the property.
Lenders may either use a Fannie Mae
and Freddie Mac Form 2055 ExteriorOnly Inspection Residential Appraisal
Report (most current version) or an
Automated Valuation Model (AVM) to
establish property value. Any use of
AVMs by any lender participating in the
pilot program must be approved by FHA
on a case-by-case basis. HUD will
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discuss this issue further with lenders
in the review of their Expression of
Interest. HUD notes, however, that
potential purchasers of PowerSaver
loans from originating lenders may have
additional or more restrictive criteria
regarding the use of AVMs, which
lenders seeking to sell loans to such
entities may be required to meet.
6. Credit requirements for borrowers
(24 CFR 201.22). In addition to the
requirements under the Title I program,
all borrowers participating in the
Retrofit Pilot Program must have a
decision credit score of 660 or higher.
The decision credit score used by FHA
is based on methodologies developed by
the FICO Corporation. FICO scores,
which range from a low of 300 to a high
of 850, are calculated by each of the
three National Credit Bureaus and are
based upon credit-related information
reported by creditors, specific to each
applicant. Lower credit scores indicate
greater risk of default on any new credit
extended to the applicant. The decision
credit score is based on the middle of
three National Credit Bureau scores or
the lower of two scores when all three
are not available, for the lowest scoring
applicant.
The borrower’s total debt-to-income
ratio cannot exceed 45 percent, as under
the Title I program. HUD recognizes that
requiring a minimum credit score for
participation in the pilot program will
mean that some homeowners cannot
participate. However, given that this is
a pilot program, HUD has determined to
limit the Retrofit Pilot Program to
borrowers with these credit scores in
order to make an initial assessment of
the interaction of credit ratings and
repayment in connection with home
energy retrofit loans.
7. Charges to borrower to obtain loan
(24 CFR 201.25). The regulations
provide for a HUD-established list of
fees and charges that may be included
in a property improvement loan. A
slightly different list of fees and charges
is established for the Retrofit Pilot
Program in an appendix to this notice.
The list indicates which of those fees
and charges may be financed as part of
a PowerSaver loan.
8. Conditions for loan disbursement
(24 CFR 201.26). In addition to current
Title I requirements pertaining to
disbursement of loan proceeds, the
Retrofit Pilot Program funds shall be
disbursed to the borrower(s) in two
increments: (1) 50 percent of the
proceeds shall be disbursed at loan
funding/closing; and (2) the remaining
50 percent of the proceeds shall be
disbursed after the energy retrofit
improvements have been completed as
evidenced by an executed Completion
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Certificate for Property Improvements
(form HUD–56002) by the borrower(s),
and a lender-required inspection.
9. Dealer loans (24 CFR 201.27).
Under the Title I program, a dealer loan
(defined at 24 CFR 201.2) ‘‘means a loan
where a dealer, having a direct or
indirect financial interest in the
transaction between the borrower and
the lender, assists the borrower in
preparing the credit application or
otherwise assists the borrower in
obtaining the loan from the lender.’’
Dealer loans will not be permitted in
the Retrofit Pilot Program. The reason
for this limitation is that dealer loans
have been disproportionately correlated
with poor loan performance under Title
I and other home improvement loan
programs in the past. While HUD
recognizes that there are many
responsible dealers who can and would
provide financing through dealer loans
in a responsible manner, it is limiting
the Retrofit Pilot Program to ‘‘direct
loans.’’ ‘‘Direct loans’’ is defined under
the Title I program (at 24 CFR 201.2) as
‘‘a loan for which a borrower makes
application directly to a lender without
any assistance from a dealer.’’ HUD
believes that home improvement
contractors and others whose activity
may be described under the definition
of ‘‘dealer’’ for the Title I program will
play an important role in ensuring the
pilot’s success by performing the actual
work related to the retrofits.
However, home improvement
contractors may provide information to
homeowners as to how they may obtain
a PowerSaver loan, including the
identity of lenders who are participating
in the program.
10. Loan servicing (24 CFR 201.41).
Under the Title I program, lenders
remain responsible for proper collection
efforts, even though actual loan
servicing and collection may be
performed by an agent of the lender. In
addition to these requirements, the
servicer of a Retrofit Pilot Program loan,
whether the servicer is the original
lender or a subsequent servicer, as
under FHA’s major single family
program (commonly referred to as the
Title II program), is fully responsible for
the required servicing responsibilities.
As under the Title II program, ‘‘the
mortgagee shall remain fully responsible
for proper servicing, and the actions of
its servicer shall be considered to be the
actions of the mortgagee.’’ HUD
emphasizes that the servicer shall also
be fully responsible for its actions as a
servicer. HUD intends to seek recovery
from servicers if FHA losses are
attributable to servicing errors.
In addition, as noted, lenders that also
service loans they originate under the
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17945
pilot program may utilize HUD
incentive payments under the program
to reduce servicing costs that deliver
bona fide benefits to borrowers.
11. Insurance claim procedure (24
CFR 201.54). Under the Title I program,
HUD requires that insurance claims be
fully documented.
Under the Pilot Program, the holder of
the note will be accountable to HUD for
origination/underwriting errors, and the
servicer will be accountable to HUD for
servicing errors, as long as the servicer
is a HUD-approved lender. To effectuate
this, the insured lender must enter into
an agreement with its servicer, under
which the servicer agrees to be liable to
HUD for such errors, and which
identifies HUD as a third-party
beneficiary of such agreement.
VI. Evaluating the Success of the
Retrofit Pilot Program
As stated in the November 10, 2010,
notice, HUD’s goals for the Pilot
Program are: (1) To facilitate the testing
and scaling of a mainstream mortgage
product for home energy retrofit loans
that includes liquidity options for
lenders, resulting in more affordable
and widely available loans than are
currently available for home energy
retrofits; and (2) to establish a robust set
of data on home energy efficiency
improvements and their impact—on
energy savings, borrower income,
property value, and other metrics—for
the purpose of driving development and
expansion of mainstream mortgage
products to support home energy
retrofits.
HUD’s evaluation of PowerSaver will
be focused on the extent to which the
pilot program achieves those goals. To
address the first goal, HUD, through its
internal staff and systems, will closely
assess lender performance and
experience in marketing, originating,
servicing and selling PowerSaver loans.
As a pilot program in which a small
number of lenders will participate,
PowerSaver will afford HUD an unusual
ability to learn from lenders as they
deploy PowerSaver loans. As the
PowerSaver program launches and
lenders establish marketing plans, loan
interest rates, and strategies for holding
and/or selling loans, HUD will be in
position to assess market impacts as
they develop. HUD, working with its
lender partners in the pilot program,
will get a sense of the factors that
contribute to (or impede) consumer
demand for home energy efficiency
improvement financing. In addition, as
noted, lenders will be reporting
regularly to HUD on loan performance
and the uses of loan proceeds for
various improvements. Thus, HUD will
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have a sense of performance and
preference within specific lender
programs and markets, as well as
potential trends across the portfolio of
lenders. HUD will not attempt to rush
to conclusions, and will expect possible
changes in trends as the pilot program
matures and expands.
As a pilot program, one of the
principal purposes of the Pilot is to
generate data on key questions that can
help make the case for additional
mainstream mortgage products to
support home energy retrofits, including
first mortgage options. HUD is therefore
committed to a robust evaluation
program in connection with the Pilot.
(The evaluation will also enable HUD to
assess the success of possible
modifications to the existing Title I
program before initiating, through
rulemaking, any changes to the Title I
regulations.)
To address the second goal, HUD will
focus on three overarching questions: (1)
Did homes reduce their energy
consumption after retrofits were
completed? (2) Did homeowners realize
lower energy bills as a result of the
retrofits? and (3) Were home values
affected as a result of the retrofits? Data
from the PowerSaver Pilot Program
suggesting answers to these questions
will help fill a major void and start to
establish a basis for analyzing other
financing.
This component of the evaluation will
be conducted by a third party with
which HUD will contract. That entity
will be under contract as the pilot
program launches and lenders begin to
make loans. HUD anticipates that a
critical component of this part of the
evaluation will be the third party’s
ability to access pre- and post-retrofit
utility data from at least a sample of
PowerSaver homeowners. HUD is aware
of effective practices for third parties to
access this information, on a
confidential basis, and will encourage
the evaluation contractor to utilize such
practices, including those developed
and implemented by DOE.
HUD acknowledges that the issues
identified can be challenging impacts to
evaluate, for reasons ranging from
‘‘rebound effects’’ to consumer concerns
about access to utility billing data. HUD
believes that it must attempt to do so,
however, and believes that additional,
useful information at a meaningful scale
can be obtained through the PowerSaver
program. HUD believes that continued
progress on mainstream mortgage
financing options for home energy
retrofits requires attention to these
issues.
HUD recognizes that an evaluation of
PowerSaver could also consider other
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important questions. HUD will explore,
internally and with its contractor, the
feasibility of adding to the core
evaluation scope, potentially including:
(1) Lender costs for originating and
servicing; (2) impact of interest rates on
consumer participation; (3) relative
effectiveness of nonfinancial
programmatic elements (consumer
education, product marketing, auditing
tools, and workforce quality assurance);
and (4) the extent to which specific
home energy improvements are chosen
and the results from specific measures.
The results of the evaluation program
will heavily inform HUD’s
determination of whether to make the
PowerSaver pilot program a permanent
FHA program, subject to any desired
changes and pursuant to any
appropriate rulemaking process that
HUD may determine is necessary. A
successful pilot program, and a sound
basis for making PowerSaver a
permanent program would be reflected
in an evaluation that HUD believes
demonstrates that: (1) Lenders
demonstrate that there is a market for
PowerSaver loans in their communities
that they can serve on a viable
continuing basis, facilitated to the
extent necessary by an ability to sell or
securitize PowerSaver loans; (2) the best
available data suggests that PowerSaver
loans are resulting in more home energy
retrofits (and related jobs and economic
benefits), lower energy use, and lower
energy bills; and (3) FHA systems and
staff indicate that FHA can continue and
potentially expand the program in a safe
and sound manner.
VII. Findings and Certifications
Paperwork Reduction Act
The information collection
requirements in this notice have been
approved by the Office of Management
and Budget (OMB) under the Paperwork
Reduction Act of 1995 (44 U.S.C. 3501–
3520) (PRA) and assigned OMB Control
Number 2502–0596. In accordance with
the PRA, an agency may not conduct or
sponsor, and a person is not required to
respond to, a collection of information,
unless it displays a currently valid OMB
control number.
Executive Order 12866, Regulatory
Planning and Review
OMB reviewed this notice rule under
Executive Order 12866 (entitled
‘‘Regulatory Planning and Review’’). As
was the case with the November 10,
2010, notice, this notice has been
determined to be an ‘‘economically
significant regulatory action,’’ as defined
in section 3(f)(1) of the Order. The
revised impact analysis for this notice is
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available at http://www.hud.gov/offices/
adm/hudclips/ia/. The following
provides a brief summary of the finding
relating to the aggregate costs, benefits,
and transfers of the pilot program
contained in the analysis:
Introduction. As discussed more fully
in the accompanying impact analysis,
HUD envisions that the pilot program
will provide insurance for up to 24,000
loans over the 2-year period of the pilot
program, with an expected average loan
size of $12,500. The program is
therefore expected to result in the
extension of up to $300 million in FHAinsured energy efficiency property
improvement loans over the 2-year
period and a resulting energy-saving
valued at as much as $630 million (in
present discounted value).
Benefits. The aggregate net benefits
are obtained by multiplying the
individual net benefits by the expected
number of loans and adding the
expected social benefits of reduced
energy consumption. As a base case,
HUD assumes a consumer household
with annual savings of $1,000, a 0
percent price growth, and a 7 percent
discount rate. The present value of a
technical retrofit for this base case
scenario is $11,400. Assuming a
rebound effect of 30 percent yields a
comfort benefit of $3,400 and energy
savings of $8,000 per participant.4 As
noted, approximately 24,000 loans are
expected over 2 years. For the base case
scenario, this would equal $41 million
in comfort benefits and $96 million in
energy savings for each year of the
program. The benefits of the FHA
program may not equal the sum of the
benefits of all retrofits financed through
the program, but only reflect the
benefits of the retrofits that would not
have occurred without the program;
however, the existence of significant
market imperfections and the lack of
affordable financing make it reasonable
to assume that a large proportion, if not
all of the loans, will generate benefits.
Costs. The cost of receiving the
energy-savings is the upfront investment
plus the costs of financing the
investment. The cost per investment is
thus equal to the size of the loan, or
$14,880 on average.
Transfers to Consumers. The transfer
to consumers is equal to the difference
4 The ‘‘rebound effect’’ refers to the fact that the
reaction of the consumer to the energy-saving
technology will not necessarily reduce energy
consumption by what is technically possible. By
increasing energy efficiency, the retrofit reduces the
expense of physical comfort and will thus increase
the demand for comfort. In fact, the retrofit may
have been driven for a demand for more heating in
the winter or cooling in the summer. The size of
the rebound effect will depend on the income of the
household and the path of energy prices.
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between the FHA interest rate and the
interest rates on other loans available for
the same purpose. As discussed,
alternative means of financing are
limited and come with higher interest
costs. However, if the next best interest
rate for the consumer were fairly low at
10 percent, then this loan would
represent a transfer of approximately
$5,000 per household. Aggregated over
12,000 participants, the aggregate
annual consumer transfer through lower
interest costs would be $62 million.
The docket file is available for public
inspection in the Regulations Division,
Office of General Counsel, Department
of Housing and Urban Development,
451 7th Street, SW., Room 10276
Washington, DC 20410–0500. Due to
security measures at the HUD
Headquarters building, please schedule
an appointment to review the docket file
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by calling the Regulations Division at
202–402–3055 (this is not a toll-free
number). Individuals with speech or
hearing impairments may access this
number via TTY by calling the Federal
Information Relay Service at 800–877–
8339.
Environmental Impact
A Finding of No Significant Impact
(FONSI) with respect to the
environment was prepared in
accordance with HUD regulations at 24
CFR part 50, which implement section
102(2)(C) of the National Environmental
Policy Act of 1969 (42 U.S.C.
4332(2)(C)). Individual mortgage
insurance actions taken under the pilot
program are categorically excluded
under HUD’s regulations at 24 CFR
50.19(b)(17) and not subject to the
federal laws and authorities cited in 24
CFR 50.4, other than 24 CFR 50.4(b)(1)
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17947
and (c)(1), and 24 CFR 51.303(a)(3). The
FONSI is available for public inspection
between the hours of 8 a.m. and 5 p.m.
weekdays in the Regulations Division,
Office of General Counsel, Room 10276,
Department of Housing and Urban
Development, 451 7th Street, SW.,
Washington, DC 20410. Due to security
measures at the HUD Headquarters
building, please schedule an
appointment to review the FONSI by
calling the Regulations Division at 202–
708–3055 (this is not a toll-free
number). Individuals with speech or
hearing impairments may access this
number via TTY by calling the toll-free
Federal Information Relay Service at
800–877–8339.
Dated: March 24, 2011.
Joseph F. Smith,
General Deputy Assistant Secretary for
Housing—Federal Housing Commissioner.
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[FR Doc. 2011–7551 Filed 3–30–11; 8:45 am]
BILLING CODE 4210–67–C
DEPARTMENT OF HOUSING AND
URBAN DEVELOPMENT
[Docket No. FR–5420–N–04]
Notice of Regulatory Waiver Requests
Granted for the Fourth Quarter of
Calendar Year 2010
AGENCY:
Office of the General Counsel,
HUD.
ACTION:
Notice.
Section 106 of the Department
of Housing and Urban Development
Reform Act of 1989 (the HUD Reform
Act) requires HUD to publish quarterly
Federal Register notices of all
regulatory waivers that HUD has
approved. Each notice covers the
quarterly period since the previous
Federal Register notice. The purpose of
this notice is to comply with the
requirements of section 106 of the HUD
Reform Act. This notice contains a list
of regulatory waivers granted by HUD
during the period beginning on October
1, 2010, and ending on December 31,
2010.
FOR FURTHER INFORMATION CONTACT: For
general information about this notice,
contact Camille E. Acevedo, Associate
General Counsel for Legislation and
Regulations, Department of Housing and
Urban Development, 451 7th Street,
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SUMMARY:
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SW., Room 10282, Washington, DC
20410–0500, telephone 202–708–1793
(this is not a toll-free number). Persons
with hearing- or speech-impairments
may access this number through TTY by
calling the toll-free Federal Information
Relay Service at 800–877–8339.
For information concerning a
particular waiver that was granted and
for which public notice is provided in
this document, contact the person
whose name and address follow the
description of the waiver granted in the
accompanying list of waivers that have
been granted in the fourth quarter of
calendar year 2010.
SUPPLEMENTARY INFORMATION: Section
106 of the HUD Reform Act added a
new section 7(q) to the Department of
Housing and Urban Development Act
(42 U.S.C. 3535(q)), which provides
that:
1. Any waiver of a regulation must be
in writing and must specify the grounds
for approving the waiver;
2. Authority to approve a waiver of a
regulation may be delegated by the
Secretary only to an individual of
Assistant Secretary or equivalent rank,
and the person to whom authority to
waive is delegated must also have
authority to issue the particular
regulation to be waived;
3. Not less than quarterly, the
Secretary must notify the public of all
waivers of regulations that HUD has
approved, by publishing a notice in the
Federal Register. These notices (each
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17951
covering the period since the most
recent previous notification) shall:
a. Identify the project, activity, or
undertaking involved;
b. Describe the nature of the provision
waived and the designation of the
provision;
c. Indicate the name and title of the
person who granted the waiver request;
d. Describe briefly the grounds for
approval of the request; and
e. State how additional information
about a particular waiver may be
obtained.
Section 106 of the HUD Reform Act
also contains requirements applicable to
waivers of HUD handbook provisions
that are not relevant to the purpose of
this notice.
This notice follows procedures
provided in HUD’s Statement of Policy
on Waiver of Regulations and Directives
issued on April 22, 1991 (56 FR 16337).
In accordance with those procedures
and with the requirements of section
106 of the HUD Reform Act, waivers of
regulations are granted by the Assistant
Secretary with jurisdiction over the
regulations for which a waiver was
requested. In those cases in which a
General Deputy Assistant Secretary
granted the waiver, the General Deputy
Assistant Secretary was serving in the
absence of the Assistant Secretary in
accordance with the office’s Order of
Succession.
This notice covers waivers of
regulations granted by HUD from
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| File Type | application/pdf |
| File Title | Document |
| Subject | Extracted Pages |
| Author | U.S. Government Printing Office |
| File Modified | 2013-07-25 |
| File Created | 2011-03-31 |